Validity of New Feature Phone Market

What once looked like a sky's-the-limit market for smartphones has been grounded.

If this week's Mobile World Congress gave us any clue, low-cost mobile handsets are back in the spotlight. The battle over smartphones loaded with bells and whistles is fading. A new skirmish is emerging in the segment that used to be called feature phones. If anyone assumed that the industry's pundits and market research companies abandoned hope for feature phones a few years ago, well, not so fast.

"The real significance" of the market for phones priced below $50 "is the validity of the addressable sub-today's-smartphone market," John Jackson, program vice president for mobility research at IDC, told us. "The precise size is debatable, but it'll be in the tens of millions, if not hundreds of millions."

The Worldwide Quarterly Mobile Phone Tracker that IDC released Wednesday released confirms the significant slowdown in smartphone momentum. The research firm said growth in global smartphone shipments will fall sharply this year and keep slowing through 2018, with the average prices dropping significantly.

In fact, after 39.2% growth in 2013, when a billion smartphones were sold, the smartphone market will grow only 19.3% this year and 6.2% in 2018, IDC said.

Against this backdrop, unanswered questions focus on whether chip vendors and handset OEMs -- which seem singularly intent on adding more MIPS to their hardware -- are prepared for the shifting landscape. More importantly, do they even want to play in the market for next-generation, low-cost smartphones aimed at first-time users?

A closer look at smartphone sales by price range reveals a clear trend for higher market growth among cheaper phones. IDC analyst Francisco Jeronimo told Reuters this week that "smartphone sales in the sub-$100 category alone more than tripled to hit 159 million last year from 45.4 million in 2012." The growth was even faster for phones costing less than $50 -- "up from just 900,000 in 2012 to 19.5 million last year."

Many industry observers foresee a big shift in the smartphone market. Ryan Reith, program director with IDC, called 2014 "an enormous transition year for the smartphone market" in a press release on the quarterly report. "Not only will growth decline more than ever before, but the driving forces behind smartphone adoption are changing. New markets for growth bring different rules to play by and 'premium' will not be a major factor in the regions driving overall market growth."

New rules
When it comes to new rules, nobody dropped a bigger bombshell at the Mobile World Congress than Firefox and Spreadtrum. They announced an ambitious plan for $25 smartphones.

Interesting prediction of the future market. I guess I would expect that the results will be different. I dont' expect windows, blackberry or others to do that good. There may be an Others that will do good, but it would have to be a break out.

Clearly there is a lot of demand in developing nations for low cost phones that can connect to the internet, but I'm curious how the data pricing tiers play into that. Is data not a premium service compared to voice in the developing world as it is in the industrialized nations?

The above statement may be true. However, the original idea of having low cost computer is not only for studying and information sharing but also for learning programming. As of today, neither smartphone nor any tablet devices is the right platform to do so. Most apps are indeed developed on a computer (either Mac or PC) and download it to the device for testing before submitted to the store.

To fill the gap of learning programming, maybe, there should be an apps that link to a virtual platform of a programming language. ;)

cloud is the right answer to fill this gap. Today we are building and maybe testing apps on laptop, PC or servers but what if all the processor load can be shifted to cloud servers and a developer can just write the app on tablet and present it.

The issue of the data plan cost has been one of the main discussions at the MWC. In most developing markets people use pre-paid cards, and data is very expensive to them. But most of them are using feature phones.

Facebook is working with Gemalto offiering basic FB experience on feature phones by special SIM cards with SMS packages. They want people to experience the social network and move to a smartphone, and carriers are happy to help to get new data customers. This model is already working in countries such as Morocco, Colombia and Chile.

But the data plan cost is not only an issue in developing markets. Here in Spain many people do not have a data plan for their smartphones, and try to connect only by wi-fi. Since basic free Wi-Fi is available in many cities they just jump from hotspot to hotspot and get a connection.

As the focus shifts to Cloud and a high spped network, there won't be any need for smart phones. The simple feature phones with a better display screen would be able to achieve the same perfromance what a smart phone of today would do.

I would think that as the cloud expands and develops the need for smartphones of a variety of calibers will also assert itself more and more. But that's not a real certainty. The cloud throws the entire smartphone market for a loop--it makes everything sort of questionable.

Low cost is preferable to entire geographical areas and market segments in the overall industry. I don't know that we'll ever see sub 100 dollar PCs, or what that would look like exactly, but the demand for it would be there if someone could afford to make it.